Oil firms trim jet fuel prices by about 4%

New Delhi / Palakkad: Oil marketers have reduced jet fuel prices by Rs2,100 per kilolitre, equivalent to at least 3.8% of the current price, after the government scrapped basic customs duty of 5% on the fuel on Friday to stem losses of local airline firms.

“The price cut will be effective from midnight of 3 November,” an oil marketing company executive said on condition of anonymity.

The fuel will now sell at Rs44,965.70 a kilolitre in Delhi and Rs46,518.85 a kilolitre in Mumbai.

Jet fuel accounts for 45-55% of the operating costs of airlines in India. Mint had reported on the government’s move to rationalize jet fuel levies on 17 October. Oil marketers such as Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd had cut jet fuel price by Rs9,429.87 a kilolitre, or 16.6%, at the start of this fortnight.

The government had earlier agreed to a rationalization of jet fuel duties if airline firms did not lay off staff to protect profits. Airlines together expect losses of some $2 billion (Rs9,800 crore) this fiscal year to March 2009.

“Air India in first five months of this fiscal has spent Rs1,400 crore, more than what is budgeted, due to increase in the operating cost, mainly on account of jet fuel prices. Any savings due to decrease in the jet fuel prices will not be sufficient to offset this...,” said Jitender Bhargava, executive director of communications at state-run National Aviation Co. of India Ltd, which runs Air India.

Although fuel prices are falling, the outgo on lease rentals for planes and salaries of expatriate staff have increased because of the 20% depreciation of rupee against the dollar this year, he pointed out.

Low-cost carrier SpiceJet Ltd’s chief commercial officer Samyukth Sridharan said Monday’s decision by oil firms was not likely to lead to a fare cut. But, he said, “we are exploring options to...maybe stimulate advance bookings or look at other discounts.”